What is at your discretion?

I learned very early on that trading successfully requires a strategy and a plan so that the trader knows what he/she is doing at all times. The market is capable of doing anything, and so the trader must have a plan before going into battle. This got me thinking about what it means to be a discretionary trader. I'm the type of guy who likes only black/white scenarios, no gray. Only hard and fast lines, no overlap. The market obviously does not act in this manner however. I'm at a point now where I have the foundation of a strategy. I've just begun sim-trading in order to test my strategy and eventually refine it until I get a legitimate profitable edge.

While doing this, a question popped into my head:

For those of you ETers who call yourselves "Discretionary Traders," what part of your trading do you leave to your discretion?

Is it merely the fact that you haven't automated your strategy yet? Or is it something like your targets and stops change depending on the market's volatility? Does anyone exit trades if their intuition doesn't feel right? Or do you consider discretionary trading to be more along the lines of ignoring trend-signals in a trading range?

Just curious to see how various traders trade.

For myself, I don't want to take any action unless I have a rule that allows me to or a signal for a trade setup. I suppose the discretionary part of my trading would be my initial stop loss size. It may change depending on how far away the pivot high or low is from entry, but it won't get larger than what my maximum risk on a trade allows, potentially forcing a setup to be ignored.

1) what % I am going to risk per trade. However, I have a range limit that it MUST falls within ( 0.5%-1.25% capital risk per trade). Usually I risk ~0.9% except when I am not "feeling as confident" in the trade I may risk 0.5-0.7% and when "I feel confident" I may risk 1-1.2%.

2) When I see multiple trade opportunities within the same or correlated sector I choose the one that has the most favorable chart. I do not take each trade that pops up on my analysis. I have about 200 trades that pop up each night on my analysis but I only take ~3 of them based on my discretion.

Everything is discretionary. Your decision to stick with a strategy for better or worse till death do you part is discretionary. Your desire to cheat on your system when it looks like someting better may have come along is discretionary. The problem isn't discretionary or non discretionary. The problem is your stupid system.

Lol... the crap that spouts for advice on this forum. I 100% disagree with braincell. The mix of discretionary/rule-based models that traders can use are virtually unlimited.

In my discretionary trading, almost everything is discretionary except for the risk. In my rule-based trading, almost everything is defined except for the risk.

Lol...

You can take it in any way you want. But even my risk of course is at my discretion.. but lets boil it down better

When we say discretionary then what do we really mean? Obviously there is discretion involved to continue with a system.

What we are really talking about though are decisions. What types of decisions will I make on a routine basis (vs those I will set/forget, leave to computer)? We want to focus on making decisions that are the most productive.

These types of decisions I've found aren't cost-effective to make on a routine basis:

* Stop placement
* Max risk

I've found these decisions very worthwhile:

* Confidence based betting, i.e betting more when I'm more confident within LIMITS
* Predicting direction

So what you really want to do is focus in on the decisions that you think will produce the greatest benefit versus those that are just going to zap your energy without producing a result. This is an ongoing process. If I find a certain type of decision isn't helping my performance then I will tend to "automate" it.

As for discretionary methodology, this is more complex. The objective is find a way to operate with the market that incorporates enough of the complexity of the actual market such that the methodology can survive the many changes that the market goes through while also being simple enough such that you can execute trades.

Profitable discretionary traders don't trade on discretion. They trade on strict rules that do not change. They do this because they don't know how to automate. Discretion in any form is gambling.

The evolutionary path is as follows: gambler > discretionary trader with discretion > discretionary trader trying to be an automaton > algo

I know it's not a good idea to say this on a forum populated with discretionaries but that's just the way it is.

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Braincell, do you mean the trader is eventually functioning as an algo? See this is also how I tend to view the whole process. Ideally, I'm attempting to trade a working and tested plan, and therefore eliminate the discretionary pieces. This is why I asked this question. What is the discretionary part to trading? I suspect "discretionary" refers more to the fact that the trader is not using an automated trading system.

Braincell, do you mean the trader is eventually functioning as an algo? See this is also how I tend to view the whole process. Ideally, I'm attempting to trade a working and tested plan, and therefore eliminate the discretionary pieces. This is why I asked this question. What is the discretionary part to trading? I suspect "discretionary" refers more to the fact that the trader is not using an automated trading system.

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I don't like life. I don't like getting dirty. I want to sterilize myself, and continue until I never have to interact with anything. Never mind the fact that all life systems are becoming more and more complex and inter related. I want to withdraw and feel safe. Are you sure I'm really cut out for trading? It seems like there are a lot of risks and unknowns involved. Maybe if I can just come up with some kind of a system I can beat the market and do what no one else has ever done and I won't have to be bothered with all these decisions.

Anybody know of a good job where you can make a lot of money without having to make decisions? If this trading doesn't work out I may be looking for one.